Jane Lee, Cameron Houston

The Catholic Church's independent investigator into allegations of clerical abuse has been asked at the sex abuse royal commission whether he reported abuse to police and if he obstructed certain victims' attempts to take legal action against the church.

Independent Commissioner Peter O'Callaghan, QC, was also questioned over his involvement in decisions on how much counselling the church should fund and his frequent communication with lawyers for the Archdiocese of Melbourne, which could have compromised his independence.

Counsel assisting the commission, Gail Furness, SC, repeatedly asked Mr O'Callaghan why it was his role to advise Carelink, the Melbourne Response's counselling arm, if and when victims were given treatment.

Mr O'Callaghan replied that he was responding to a request, and that his position "doesn't preclude me from other roles in the organisation". He insisted he had acted independently at all times.

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A barrister since 1961, he was appointed the Independent Commissioner of the church's Melbourne Response – its internal process for handling abuse allegations – initially for a six-month term in 1996. Since 1996 the church has paid him more than $7 million.

Mr O'Callaghan declined to comment on whether the church's $75,000 cap was still appropriate to compensate victims, saying this would be widely publicised to those who applied to him for compensation in future.

Mr O'Callaghan was unable to immediately answer a range of questions, including the number of alleged clerical offenders, how many had been referred to police and who had provided him a letter detailing paedophile priest Kevin O'Donnell's early offending.

He said he was always bound by confidentiality except where victims gave him consent to report the abuse to police, and his power was limited to recommending to the Melbourne Archdiocese that serving priests be placed on "administrative leave", which had always been taken up.

After conferring with the Melbourne Archdiocese's legal team during a break, he told the Commission he had found 81 clerics responsible for sexual abuse and agreed to provide the Commission with more information when it resumes on Wednesday.

The Commission also questioned Mr O'Callaghan's handling of the case of Chrissie and Anthony Foster. Their daughters Emma and Katie were abused by O'Donnell, who was responsible for 50 cases of sexual abuse involving boys and girls, over a 48-year period.

Mr O'Callaghan defended seeking advice from the church's lawyers, Corrs Chambers Westgarth, on whether to "try to flush out the real intentions of the Fosters" when it became apparent they planned to sue the Church, rather than accept $50,000 in compensation offered under the Melbourne Response.

He said he would have been held in contempt of court had he continued to assess their claim simultaneously, citing a 1976 Supreme Court case involving defamation proceedings launched by then-ACTU president Bob Hawke.

Commission chairman Justice Peter McClellan questioned the veracity of his defence, saying that "the law's moved quite a bit" since then, with several High Court decisions now undermining its legal authority.

"Help me understand how it is the decision you might make – which is protected by every confidentiality control I understand the church had in place – could prejudice the fair trial of the Fosters' claim?"

Mr O'Callaghan replied: "I was more concerned ... that my findings were being utilised other than for the purpose of getting compensation for the Melbourne Response."

When the Melbourne Response was first established in 1996 under former Melbourne archbishop George Pell, Mr O'Callaghan thought he would be able to handle all victims' complaints in six months' time.

After almost two decades and over 351 complaints, Mr O'Callaghan had changed his belief that there would be "many questionable complaints" from people wanting money from the church, with most people highly credible. He now believed "one doesn't fake stories about sexual abuse".

He said he had received about five complaints in recent weeks, including one after the Royal Commission's first session in Melbourne on Monday.